and maintenance cost are considered, the method that provides a uniform charge is (a) Straight line method (b) Diminishing balance method (c) Annuity method (d) Insurance policy method . Under the written down value method of depreciation, the amount of depreciation is (a) Uniform in all the years (b) Decreasing every year (c) Increasing every year (d) None of the above . Depreciation is caused by (a) Lapse of time (b) Usage (c) Obsolescence (d) a, b and c . For which of the following assets, the depletion method is adopted for writing off cost of the asset?
(a) Plant and machinery (b) Mines and quarries (c) Buildings (d) Trademark . A depreciable asset may suffer obsolescence due (a) Passage of time (b) Wear and tear (c) Technological changes (d) None of the above. . Which method shall be efficient, if repairs and maintenance cost of an asset increases as it grows older.
(a) Straight line method (b) Reducing balance method (c) Sinking fund method (d) Annuity method Points to remember The process of allocation of the relevant cost of a fixed asset over its useful life is known as depreciation. Cost of an asset is not merely the purchase price but also the expenses incurred on the asset till it is put into use including cost of trial run. Cost of a second-hand asset includes the initial repairs charges also. Under the straight line method, the book value of the asset at the end of its useful life is reduced to zero or its scrap value.
The book value of the asset on any date is calculated by subtracting the depreciation provided to date from its original cost. The excess of sale proceeds of an asset over its book value represents profit on sale. The excess of book value of an asset over its sale price represents loss on sale. Accountancy .
Residual value of an asset means the amount that it can fetch on sale at the its useful life. (a) Beginning (b) End (c) Middle (d) None . Depreciation